Data/Event Risks
- USD:Â Of the past 3 stronger releases on headline payrolls (Dec, Nov and Aug last year), the dollar has generally gained in the first 10 minutes afterward and then been sold. The test today will be to see if a stronger than expected employment report sees dollar gains sustained, which is now becoming the tendency after stronger economic data. See how to trade the Non-Farm Payrolls with EUR/USD.
- GBP: The inflation expectations data is not a big market mover, but can sometimes cause some ripples. Interesting to watch given that Bank revised up higher its view of inflation in last month’s inflation report. Substantial increase in private sector expectations could knock sterling.
Idea of the Day
Today is going to be the big test of the new dollar dynamics. If we see the US employment report stronger than expected and investors buying the dollar as a result, then it would be further proof that the market is becoming more sensitive to the prospect of a withdrawal of stimulus from the Federal Reserve. Often in the past strong US data was taken as a sign that all was well in the world and a reason to flee to safety of the dollar for higher risk assets overseas.
Latest FX News
- EUR:Â The single currency rallied on the back of the comments from the ECB President Draghi after rates were kept steady, outperforming the gains seen on sterling. Difficult to cite a specific reason for the bullishness, beyond the fact rate cuts were not seriously contemplated (although seemingly discussed) and he remained hopeful on the economy.
- JPY:Â USDJPY above the 95.00 level overnight. GDP data returned to positive territory (just, rising 0.1%), but the momentum towards shorting the yen was evident towards the end of Thursday.
- GBP: The ‘no change’ decision from the BoE was worth our anticipated 50 pips on cable. The market action afterwards suggests that the currency needs a decent chunk of new bad news to sustain a move below 1.50.
- AUD:Â Weaker in part on the back of Chinese trade data which showed diminishing import appetite, although this does contradict some of the recent data from Australia showing a near tripling of coke exports to China. AUDUSD holding around 1.0250 into the European open.
